You're browsing the used car ads when a vehicle grabs your attention. The car you are interested in has a price that seems too good to be true. You keep scanning the page until you see two words in small print: "salvage title."
A salvage title is potentially a red flag, but the cars that carry them can be inexpensive options for car shoppers on a budget — provided you know what you are buying.
When a vehicle has been in an accident and the total damage exceeds a certain percentage of the value of the car (ranging from 75-90 percent), the insurance company will decide that it is not economically feasible to repair it and declares it a "total loss." What happens next varies by state, but in general, the motor vehicle agency will then issue a "salvage certificate" to the car. This means that the car cannot be driven, sold or registered in its current condition.
Usually, the insurance company sells the car to either a repair facility or parts dismantler. If the car is repaired, most states require that it pass a basic safety inspection before the motor vehicle agency will issue a new title. When the state does issue the title, it's "branded," and notes that the car has been salvaged or rebuilt so future owners are aware of its past.